1. Field of the Invention
The present invention generally relates to a system and a method for providing a financial transaction account with selectively variable criteria for authorizing financial transactions. More particularly, the present invention relates to a system and a method for enabling an owner of a financial transaction account to define an authorization limit on use of a financial transaction instrument associated with the financial transaction account.
2. Related Art
Consumers very often use financial transaction instruments as convenient forms of payment for purchases of goods and/or services (“goods/services”). A “financial transaction instrument,” also referred to herein as a “card,” may be any of the following: a traditional “plastic” transaction card (e.g., a credit card, a charge card, a debit card, a pre-paid or stored-value card, or the like); a titanium-containing, or other metal-containing, transaction card; a clear or translucent transaction card; a foldable or otherwise unconventionally-sized transaction card; a radio-frequency-enabled transaction card; or any other type of card used in connection with a financial transaction.
A financial transaction instrument may be configured with electronic functionality. For example, such an instrument can have electronic circuitry that is printed or otherwise incorporated onto or within it (commonly being referred to as a “smart card”), or may be a fob-type device having a transponder and a radio-frequency identification (“RFID”) reader. Additionally, a financial transaction instrument may be magnetically encoded with information, such as through use of a magnetic stripe, for example. Optionally, a financial transaction instrument may include a visible card identification number (“CID”) uniquely identifying a corresponding financial transaction account, in case the instrument cannot easily be read electronically or magnetically.
A “financial transaction account,” also referred to herein as a “transaction account,” is an account associated with an open-account system or a closed-account system, which are discussed in more detail below. A transaction account may exist in a physical or a non-physical embodiment. For example, a transaction account may be distributed in a non-physical embodiment such as an account number, a frequent-flyer account, a telephone calling account, or the like. Furthermore, a physical embodiment of a transaction account may be distributed as a financial transaction instrument.
“Open cards” are financial transaction instruments associated with an open-account system and generally are accepted by different merchants. Examples of open cards include the American Express®, Visa®, MasterCard® and Discover® cards, which may be used at many different retailers and other businesses. In contrast, “closed cards” are financial transaction instruments associated with a closed-account system and may be restricted to use in a particular store, a particular chain of stores, or a collection of affiliated stores. One example of a closed card is a pre-paid gift card for The Gap®, which typically is purchased at and may only be accepted at The Gap® stores.
Stored-value cards are financial transaction instruments that may be associated with a closed-account system or an open-account system. A stored-value card provides a cash equivalent value that may be used within an existing payment/transaction infrastructure. Stored value cards are frequently referred to as gift, pre-paid, or cash cards, in that money is deposited in an account associated with a stored-value card before use of the card is allowed. For instance, if ten dollars are deposited into the account associated with the stored-value card, then that card may only be used for payments adding up to a total of no more than ten dollars. A pre-paid gift card for a particular merchant is an example of a type of stored-value card associated with a closed-account system (i.e., the card generally can only be used with that particular merchant); and a cash card obtained from an issuer is an example of a type of stored-value card associated with an open-account system (i.e., the card generally can be used wherever the issuer's type of card is accepted).
As used herein, the term “merchant” refers to any person, entity, distributor system, software, and/or hardware that is a provider or broker of goods/services, and includes any other entity in the distribution chain of goods/services. For example, a merchant may be a grocery store, a retail store, a travel agency, a service provider, a public-service utility, a school, a library, an on-line merchant, a government agency, or the like.
Also, as used herein, the terms “consumers,” “customers,” and “users” may be used interchangeably to refer to persons who purchase goods/services from merchants.
In regard to use of a financial transaction account, a customer may communicate or interact with a merchant in person (e.g., at a box office), telephonically, or electronically (e.g., from a computer via the Internet). During the interaction, the merchant may offer good/services to the customer. The merchant also may offer the customer an option to pay for the goods/services using any number of available transaction accounts via their corresponding cards. Furthermore, the cards may be used by the merchant as a form of identification of the customer.
Generally, a merchant that wants to provide customers with the option to pay for goods/services with a particular type of open card will enter into an agreement with the issuer of that type of card (e.g., American Express®, Visa®, Discover®, MasterCard®, or the like). The issuer typically is a financial organization (e.g., American Express®, JPMorgan Chase, MBNA®, Citibank®, or the like) whose card-issuing activities are government regulated.
Cards provide consumers with a convenient way to pay for purchases, and also provide merchants with a convenient way to obtain payment for purchases. Because of the wide use of cards by consumers, the types and number of merchants that accept cards has grown and now, in addition to the more traditional merchants such as stores and restaurants, include taxi drivers, doctors, schools, street vendors, on-line vendors, and government agencies, to name a few. Further, through the use of point-of-sale (“POS”) devices, merchants can easily request authorization from issuers for purchases for which cards are presented for payment, and obtain prompt payment for purchases.
As will be appreciated by those of skill in the relevant art(s), transactions in which cards are presented to merchants to pay for purchases may occur through any suitable communication medium, such as, for example, a PSTN, an intranet, a global and public network (e.g., the Internet), in addition to the traditional face-to-face transactions, and may occur using any type of point-of-interaction device (e.g., a POS device, a personal digital assistant (“PDA”), a cellular telephone, a kiosk, etc.) that enables communication of such transactions. Communications may occur online or off-line and may be wired or wireless.
As used herein, a “POS device” refers to any electronic device used by a merchant to input information regarding a purchase as well as other information, such as information regarding the merchant, information for identifying a financial transaction account from which payment for the purchase is to be obtained, etc. For example, the input information may include a dollar amount of the purchase and identification information electronically and/or magnetically read from a card used to make the purchase. Optionally, the identification information may be manually input at the POS device based on a visible CID. The purchase information and the identification information are transmitted to the issuer's computer system, which identifies the transaction account and makes a determination of whether the purchase is approved or rejected based on account information regarding the transaction account. The issuer's computer system then transmits a message back to the POS device regarding the purchase. Examples of messages sent between the POS device and the issuer's computer system include: a request for authorization; an authorization approval or rejection; an instruction to obtain additional identification to verify the identity of the person presenting the card; a message indicating that the financial transaction account has reached a maximum aggregate dollar amount; etc.
Issuers have a financial incentive to contract with as many merchants as possible to accept their cards. Typically, an issuer is paid a so-called “discount rate” by each merchant signed up to accept payment using the issuer's type of card. The discount rate may be, for example, a flat rate paid periodically or a rate based on the merchant's net sales that are paid for using the issuer's type of card.
In order to convince merchants to accept its card, an issuer may provide the merchants with information showing that a large number of consumers hold its card and that a significant percentage of purchases made using a card have been made using the issuer's type of card. Further, the issuer may provide the merchants with information on incentive programs used to promote consumer loyalty to its type of card.
A number of types of incentive programs are in use today. One type is commonly referred to as a “reward program” and often is associated with a closed-account system. Such a program rewards customers for purchases made from a particular merchant by providing the customers with reward points based on, for example, a predetermined formula or ratio that relates a customer's purchase volume (e.g., dollar-amount spent and/or quantity purchased, etc.) to a certain number of reward points. The reward points may be accumulated and redeemed in a plurality of ways, including exchanging the reward points for additional goods/services from the merchant or for goods/services that may be selected from an approved redemption catalog, for example.
One well-known example of such a reward program is a “frequent flyer” program, which rewards customers of an airline with “mileage points” based upon, for example, the distances that the customers fly with that airline. The mileage points accumulated by the customers may be redeemed for free airfare, free travel-class upgrades, free car rentals and/or the like.
Another well-known example of a reward program associated with an open-account system is one that promotes or induces usage of a particular type of card, by distributing reward points or dollar-value points based upon the volume of purchases (e.g., total number of purchases and/or total cost of purchases, etc.) made using the card. This type of program may be designed such that a financial transaction account corresponding to the card accumulates reward points that may be redeemed for selected goods/services, or, alternatively, accumulates points that have a dollar value, which may be applied toward a balance of the transaction account. An example of the latter program is the Discover® Cashback Bonus® program.
Conventional incentive programs, such as those described above, generally are aimed at increasing the usage of cards but have a limited effect on increasing the number of cards in circulation. That is, conventional incentive programs enable an issuer (or a merchant) to increase the number of purchases and/or the dollar amount of purchases made using the issuer's (or merchant's) type of card, but do not significantly affect the number of consumers who hold the issuer's (or merchant's) type of card.
Given the foregoing, a need exists for an incentive program that allows an issuer (or a merchant) to increase the number of its type of cards in circulation.